Chaz, according to Wikipedia there are at least sixty "bitcoin knockoff" cryptocurrency systems, including nine that they call "notable:" Bitcoin, Ripple, Litecoin, Peercoin, Dogecoin, Mastercoin, Namecoin, Auroracoin, and Primecoin. I suppose one of the attractive features is that if you start the currency or get in at the beginning, you get to do the "mining" when it is still easy.

So, yes, one of the issues with cryptocurrencies is knowing whether the one you commit to is ultimately going to turn out to be one of the survivors. It's one of the things people forget about new technologies. It's possible to guess that radio is going to be big, but not know whether to invest in Orient or Ford; that personal computers are going to be big, but not know whether to invest in Apple or Osborne; etc.

Yeah, what did Buffet say about gold? Useless yellow metal that you dig out of one hole in the ground and pay people to keep in another hole in the ground?

Money is a useful abstraction, but at the end of the day, no matter what kind of money you use that's all it is, an abstraction. What makes it useful is the willingness of people to take it in exchange for goods and services. It doesn't matter if it's a string of bits or a string of beads.

Rl2 wrote:I got rid of all bitcoin once Dogecoin caught on. Doge started as a joke and then people actually started accepting it as real value. The blockchain as a platform is where the real value lies.

But I've done this. And one loses capital-- one can write off the investment. Lottery tickets.

At which point, one loses all the money one could have made comfortably ticking away at say 6% pa in Vanguard Total Stock Market. Or even 2.5% pa in Vanguard Total Bond Market. Let alone the esoteria of, say, Vanguard Total International .

It's that opportunity cost which is so painful. Capital, once lost, cannot be replenished easily.

Yeah, what did Buffet say about gold? Useless yellow metal that you dig out of one hole in the ground and pay people to keep in another hole in the ground?

Money is a useful abstraction, but at the end of the day, no matter what kind of money you use that's all it is, an abstraction. What makes it useful is the willingness of people to take it in exchange for goods and services. It doesn't matter if it's a string of bits or a string of beads.

The other 2 functions of money are also important:

- a numeraire or unit of account - what are 5 schickelgrubers worth against 3 melons in my inventory?

- store of value

Turns out this is true even in those Polynesian islands where they have the massive stones with holes in them. Stones get lost at sea, yet *still* serve as units of transaction.

Right. A medium of exchange, a store of value, a unit of account. And what bothers me about bitcoin is that I see not the slightest bit of evidence that there was any engineering goal to stabilize its value, so that it can serve well either as a store of value or a unit of account.

epicahab wrote:It's true that at this point Bitcoin has value because many people agree that it has value, but also it is "mined" by people running high speed computers.

So, they spend money in an effort to slowly have a fraction of a bitcoin "drip" down to them from the network.

I don't think that will have a huge bearing on the value. It might set some kind of long run equilibrium floor (the marginal cost of creating another bitcoin) but for various reasons around liquidity and privacy, there will still be producers willing to work at a loss, e.g. those trying to bypass Chinese exchange controls, or transact in dirty money.

Also, many online vendors and businesses now offer BTC as payment.

Takeing huge volatility risk in doing it. I just wonder whether that can become a big market. Except for those who have reason to hide money-- money launderers, illicit transactions etc. The 160,000 computer ransomware breakout a few weeks ago asked for payment in bitcoins, I believe.

Most of the other coins have no value other than just trade speculation.

Some, like Ripple XRP, are signing deals with banks and using their coin to speed up the payment system and make it cheaper.

nisiprius wrote:Right. A medium of exchange, a store of value, a unit of account. And what bothers me about bitcoin is that I see not the slightest bit of evidence that there was any engineering goal to stabilize its value, so that it can serve well either as a store of value or a unit of account.

And it's usefulness then is to those who care less -- money launderers and "dark money" in all its various forms. Which the authorities presumably have a view about.

nisiprius wrote:
Right. A medium of exchange, a store of value, a unit of account. And what bothers me about bitcoin is that I see not the slightest bit of evidence that there was any engineering goal to stabilize its value, so that it can serve well either as a store of value or a unit of account.

And it's usefulness then is to those who care less -- money launderers and "dark money" in all its various forms. Which the authorities presumably have a view about.

nisiprius wrote:
Right. A medium of exchange, a store of value, a unit of account. And what bothers me about bitcoin is that I see not the slightest bit of evidence that there was any engineering goal to stabilize its value, so that it can serve well either as a store of value or a unit of account.

And it's usefulness then is to those who care less -- money launderers and "dark money" in all its various forms. Which the authorities presumably have a view about.

Nice to read the comments of two very bright people.

You are too kind.

"Bright" is subjective-- I am smart about some things, dumb about others. I am just an anonymous poster on the internets.

And bright doesn't mean we are knowledgable about this issue in particular. You've probably seen this research that you can create expertise in something (valuing oil field properties, or medical diagnosis) but whilst that will put you above the pack in those areas, it will also tend to make you overconfident-- you will tend to extend your judgement to other areas of life, and behave as if you are equally competent in those, when you are not.

I admit to not "getting" bitcoin although I can see a lot of applications of the technology. It seems to me as if the cryptocurrency thing is overdone *unless* there's some way of linking its value to a more common standard (like the USD). Something that has the cryptocurrency attributes, but has a fairly stable value.